The accompanying table shows combinations of physical capital per worker and output per worker for both methods,

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The accompanying table shows combinations of physical capital per worker and output per worker for both methods, assuming that human capital per worker is fixed.

a. Using the data in the accompanying table, draw the two production functions in ‘one diagram. Androde’s current amount of physical capital per worker is 100.

In your figure, label that point A.

b. Starting from point A, over a period of 70 years, the amount of physical capital per worker in Androde rises to 400.

Assuming Androde still uses Method 1, in your diagram, label the resulting point of production B. Using the Rule of 70, calculate by how many percent per year output per worker has grown.

c. Now assume that, starting from point A, over the same period of 70 years, the amount of physical capital per worker in Androde rises to 400, but that during that time period, Androde switches to Method

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Economics

ISBN: 9781319181949

5th Edition

Authors: Paul Krugman, Robin Wells

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